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Blackstone Group LP, the world's largest private equity firm, passed on a fundraising deal with the
Texas Teacher Retirement System that sent $3 billion apiece to KKR & Co. and Apollo Global Management LLC, Chairman Stephen Schwarzman said.

“We were asked to participate,” Mr. Schwarzman said Wednesday in an interview with Bloomberg. “But for us in that particular case, it didn't make much sense.”

The $107.4 billion Texas Teachers, Austin, announced the agreements with KKR and Apollo last month. The pension fund's cash won't go into a single fund at the firms. Instead, it will be placed in separately managed accounts that the pension system will oversee in partnership with each firm, giving Texas more options on how its money is invested.

In return, Texas Teachers agreed to allow the firms to reinvest a portion of Texas's profits back into the funds. Other private equity firms, including TPG Capital and Carlyle Group, have either set up separately managed accounts or are in the process of doing so.

Mr. Schwarzman said the Texas deal was “geared basically to help, from the general partner perspective, those companies expand” into areas such as hedge funds and real estate. “The issue for us at Blackstone is we were already in those businesses.”

Texas Teachers has committed money to New York-based Blackstone since the KKR and Apollo transactions were announced, Mr. Schwarzman said, adding “we have plans to be working with them.”

Asked whether Blackstone's plans with Texas Teachers involve a separately managed account, Mr. Schwarzman said, “We may have something in that area as well.”

KKR took almost a year to agree to the terms of the Texas Teachers commitment, highlighting how big private equity managers are being squeezed as they seek to keep cash flowing into their funds. The shift, which began when the financial crisis of 2008 slowed private equity fundraising, means institutions such as Texas Teachers can bargain for lower management fees and greater investment options.